May 2016 – Spending and monthly summary

This is my wet worth update and monthly summary for May – this post follows on from my May income fund update. May was a perfect storm of expenses all coming home at the same time, so it’s been a tough month for progress.

My Score for May

Living Expenses $3,900
Security Ratio 13.8%
Expenses 52.4%
Savings 15.3%
Retirement (Taxable) 0%
Investments 32.3%
Wet Worth $134,993
Work Freedom Day 29-Oct-16 (!)
Emergency Fund 101.9%

Living Expenses

This is my fixed monthly budget for living expenses and it includes both essential (e.g. groceries, mortgage, insurance), and non-essential (e.g. music, travel) purchases. $3,900 is the amount from my current Budget 4.0.

I spent a total of $4,668.00 in May which means I overspent my budget by $768. However this total includes $1,350 that I paid with from my Savings.

Security Ratio

This is the percentage of my monthly living expenses budget that current dividend income pays.

I’m changing how I calculate this value; it’s no longer tied to the actual dividend income per month. Instead I’m withdrawing a flat monthly amount of cash that’s fueled by dividends from my Income Fund. The current amount is $540 a month which is 13.8% of my current $3,900 monthly budget. This number won’t change very often going forward, perhaps twice a year if I adjust either my budget or my withdrawal rate.

Living Expenses %

The percentage of net income that’s spent on living expenses. Lower numbers are better here.

This month’s 52.4% is more or less the same as last month’s 52.8%, a slight improvement due to higher dividend income this month. I save or invest any income that I don’t spend on living expenses so this result means that my Savings Rate this month was 47.6%; that’s nearly half of my income being saved. In May 2015 I spent 53.7% of my income on expenses, so I’ve improved compared to last year.

Any change in this number is caused by a change in either income or budget similar to the Security Ratio although this calculation takes total income into account and not just dividends.

The chart above shows the trend in my Living Expenses % since the start of 2014. For the first part of 2014 I was paying two mortgages. In June 2014, I introduced Budget 1.0 after selling my first house and I made some minor tweaks in Budget 2.0 from October onwards. In January I started Budget 3.0 which I updated to Budget 3.5 in July.

Budget 4.0 started this January and is an increased amount compared to last year which will negatively affect results this year. The average percentage value should decrease over time because salary and investment income should increase faster than living expenses.

The Living Expenses % metric and the Work Freedom Day metric (see below) are both good incentives to avoid increasing the budget since both numbers are impacted by a higher budget. Currently I’m on track to hold the budget at $3,900 when I do my six-month review later this month.

Savings %

The percentage of net income spent on Savings.

I’m putting aside $560 every month for mid and long term goals (any large expense or purchase due a year or more in the future) and I’m continuing to save my old car payment amount of $540. My Emergency Fund was fully funded so I didn’t add any extra money to it but I continued to add $20 into my Cash buffer. The savings percentage was 15.3% of my month’s income compared to 16.9% last month because of lower total savings.

For the first time in ages, I spent some of my Savings this month and it’s made me re-think how I’m using that account, so I’ll write about that in a separate post.

Retirement %

This would represent the percentage of any post-tax contributions from net income towards my retirement accounts, but I don’t have any plans to do so at the moment. You can read about my target retirement account asset allocation here if you’re having trouble sleeping. It’s a simple low-cost index investing strategy using tax-advantaged accounts.

Investment %

The percentage of net income that I invest.

Any spare money left over after savings, retirement and living expenses are paid goes into my Income Fund. This month it was 32.3% of my income, although I made some additional contributions on top of that from the additional income this month.

I’ve written about my portfolio income and gains in May in a separate post, so I won’t repeat all of that here again.

Wet Worth $

My liquid assets minus all debt (excluding retirement and assets).

My Wet Worth decreased $967 in May to $134,993; down from last month’s record high. There’s a more detailed breakdown of this amount further below.

Work Freedom Day

The day in the year that my dividend income could pay for the rest of the year’s expenses.

Based on current projections and including the last dividend amounts, my Work Freedom Day has moved forward to 29 October 2016, one day closer! I’m hoping my estimates are accurate as I’d hate to see this number move back into November, but it’s certainly a move in the right direction!

Note that based on my $3,900 budget, one Work Freedom Day requires about $128 of dividend income which in turn requires about $4,000 of capital.

Emergency Fund

I’m including my Emergency Fund (EF) funding in my score card this year. This value is the actual balance vs my target balance which is 10 times my living expenses (i.e. $39,000). The stock market increased my EF funding level to 101.9% this month, up from last months 100.1%.

Wet Worth detail

I’m showing my Wet Worth in this post – this is the cost of my liquid assets minus debt, I exclude assets and retirement accounts from this number. I prefer this over Net Worth since the equity in large assets (house, car) and retirement funds is hard to get at and not always predictable. I find this is a more honest view of where I’m at on my journey.

The change in Wet Worth is caused by

Cash +$1,012 Cash for living expenses increased this month with higher medical, house and travel related costs.
Debt -$7,344 Debt increased this month as I included the total amount of my new car lease payments. I also have higher charges on my credit card that are due to be paid in June.
Savings +$1,846 Savings increased with some help from my company who added $1,500 to my HSA account. My longer-term savings in the Vanguard Wellington (VWELX) fund increased in value too.
Emergency Fund +$692 My Emergency Fund consists of the Total Stock Market fund (VTSAX). I added no new money so this is all capital growth.
Portfolio +$2,827 My Income Fund had a solid month from new capital and capital growth. See my earlier post for details.
Total -$967 Total change in Wet Worth.

May 2016 Summary

It’s been a crazy month for expenses. I spent $1,350 of my Savings on having trees removed around the house but I consider it a good long-term investment, both in protecting the house/roof and making it easier to cut the lawn. I’ve also been an almost weekly visitor at the doctor’s this month which isn’t helping either – and still more expensive visits to go 🙁

The next two months will be a large drag on my Cash accounts as I have a year’s Auto and Home insurance to pay. And we’re travelling to the UK and Spain this summer although that trip is part of our travel budget.

On the plus side, our monthly mortgage payment is decreasing a little in July, and without the $1,350 expense we would have broken even this month.

Were your expenses / budget in May on track?

Quote of the Day

Don’t be afraid to give your best to what seemingly are small jobs. Every time you conquer one it makes you that much stronger. If you do the little jobs well, the big ones tend to take care of themselves.

10 thoughts on “May 2016 – Spending and monthly summary”

  1. Hey DL,
    I think I saved some in May but wont be sure until I tally the numbers and write up my post. My wife wants me to cut down some trees near our house. They may fall some day but I would rather have the shade they offer to keep my house cooler in the summer. As for mowing I just created a huge flower bed under them in a big oval. It saves on mowing time, but I am now realizing mulch costs a lot of money (and more weeding of the bed if I don’t mulch). First world problems….I am almost at the point of just letting my yard go back to the wild ;-).

    1. Hi DFG,
      I was telling my co-workers at work that I just bought $1,350 worth of mulch since all that’s left of the trees is a pile of wood chippings! I also went with a professional – two of the trees were quite big (2 feet diameter trunk or so) and I wanted the stumps ground out too. We use a ton of mulch each year, it’s probably our biggest expense in the yard – still, a first world problem as you say. Although synthetic grass does seem very appealing when I’m out mowing the lawn 😉
      Best wishes,

  2. Cutting a tree near the house is a good thing for the roof. we did it as well. We had it done by professionals… I did not want the tree to hit the house…
    As long as you are saving, even in expensive months, than you ar on the right track
    I hope the health is fine.

    1. Hi atl,
      Yes hopefully the gutter will stop being clogged up now and there will be less green things growing on the roof too. I’m going to ask my insurance company if it’ll change my premiums as they had noted the trees in their original assessment.
      Health is okay, I’m allergic to something apparently – probably to working 8-5! 😉 But the drug I’ve been given for it is really hard on me. I’m on a ‘high-deductible health insurance’ plan which means that my monthly premiums are low ($26/month) but I have to pay a lot of the charges per visit. In the long term it’s all good as I’m regularly going to the doctor / dentist now whereas I used to avoid any medical visit for years at a time. A stitch in time saves nine 🙂
      Best wishes,

  3. Hey DL,

    I’m impressed that you do such a comprehensive update of all your finances – nice. It’s annoying having to pay for big things but I guess that’s just part of an annual budget and there’s nothing you can do.

    We just posted our savings for May, it was the first time we saved over 50% of our income. 🙂


    1. Hi Tristan,
      Yes I do get carried away admittedly. But I like seeing how I adjust the management of my finances over time as I learn and grow and change. My view of personal finance and money management has changed a lot, even since I started this blog; let alone from even earlier.

      Congrats on 50% savings! That’s fantastic and well worth a celebration (or two)!
      Best wishes,

  4. Ciao DL,
    Funnily I have to cut a tree next to my house as well! Unfortunately since Italy is Italy, we are now in the SECOND year since I requested permission to the city hall to proceed and still no answers from the authorities.. 🙁
    Oh well… I guess that’s part of living in Pizzaland.
    I am still totally amazed by the way you manage to keep track of everything, I really struggle to do that! I know it’s more of a mental attitude than anything else, but still…
    Ciao ciao

    1. Hi Stal,
      Two years?? Wow! As I say at work a lot these days, “let’s hurry up and wait!” 🙂
      I do reconcile / review my finances and every transaction pretty much daily (I use Excel for this). It usually takes 10 or 15 minutes a day. It’s easier to do it little by little than let it all build up and spend hours on it. Writing the monthly report once the excel file is filled out is the easier part. But everyone is different, you only need to do as much as helps you! 🙂
      Best wishes,

      1. Yes… two years… And you know what? Still waiting for the “ok”… Without it, if you get caught by police cutting a tree, you risk jail (this is because I live in an area that is allegedly “fine art territory”)… I really wanted to set up my expenses tracking “device”, but it’s also something that I’d love the missus to follow up too. Unfortunately with her in that area we are light years away so in the end I never set up anything… Need to get my head around it though, once I finish the Index Fund reporting and this move to Interactive Brokers of my portfolio it’s the next project to be addressed!
        Ciao ciao

        1. Hi Stal, yes it’s definitely a worthwhile project and hopefully you can reach a good compromise in the middle somewhere. Ms DL is good with sticking to the budget but we don’t budget on everything as she has some expenses such as clothing that we don’t put on the common budget; she uses her own money for those expenses.
          Best wishes,

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